Whatcha Gonna Do With That Duck?: And Other Provocations, 2006-2012 (26 page)

The first task requires nothing much but effort, and that effort is likely to be rewarded. The second task takes judgment, and the opportunity for failure is much higher.

If you’re a teacher and you give your third graders instructions for an essay, the motivated ones will listen. If you ask them for vivid, creative writing, and also let them know it must be five sentences long, in blue ink, and with not one word outside that little red line that marks the margin, guess what sort of work you’ll get back? Writing in your format is easy. Being vivid is hard. It’s easy to focus on the achievable, the measurable, and the simple.

I thought of this as I braved the insanity of JFK for a quick JetBlue flight. The instructions for the TSA folks probably fill several loose-leaf notebooks, but I imagine that they can be summarized as follows:

Volume 1: Identify suspicious people and be on the lookout for bad people and new and unimagined threats.

Volume 2: Stop anyone with liquid in their bag.

Guess which volume got read?

The guy in front of me got busted (aggressively) for having a four-ounce can of shaving cream. Isn’t it OBVIOUS that the limit is three ounces? I could hear the TSA thinking, “What’s going on here!!” At the same time that scores of expensive, trained teams of inspectors were focusing on interdicting the forbidden liquids, no one cared very much about ID or travel history or what that item on the X-ray actually was.

The same thing happens on your website every day. Sure, if I work my way through the site map and pay attention to your carefully crafted copy, I’ll probably find exactly what I need. But it’s way more likely that I’ll just click on that cute picture or leave the site altogether.

People want to feel successful, but they’re often unwilling to invest the time in doing something that might not pay off. It’s not fair, but that’s the way it works.

Most markets are busted open by one successful leader. Burton in snowboards, Henry Ford in cars, the iPod in MP3 players.

It sure seems, for a while, that the leader can do no wrong. Market share is high, the market grows, and then, oof, the leader fades.

It looks a bit like this:

The leader attracts newcomers—both new users and new competitors—to the market. The competitors offer new choices, alternative pricing and distribution models, and just plain old choice. Unless there is a significant external barrier to change (like the iTunes store or the Windows distribution monopoly), then the leader appears to fade. At one point, there were more than 2,000 car companies in the U.S.

There are several lessons available for marketers here. First, if you bust open a market, don’t expect to own it forever. Second, if you can, invest heavily in some sort of external effect that creates a natural monopoly and gives people a really good reason to stick (beyond the fact that you’re the leader). And third, if you’re not the leader, realize that: a) you’re not going to replace them, and b) being just like them isn’t the way to grow. As a market grows, the “scraps” left over from the leader can add up to a huge piece of market share. And then, over time, a new leader may emerge.

Big markets look sexy. Big markets are a problem.

Sitting at the vet’s office today, I saw a brochure for an injectable chip that makes it easier to identify a lost dog. No doubt, the investor meetings all started with, “Well, there are a hundred million dogs in the United States, and if we just make a dollar annual profit on each one …”

It sounds reasonable. It’s not.

The problem with huge markets is the same problem you’d have with playing squash or racquetball on a court that’s too big. The ball doesn’t have a wall to bounce off of. Huge horizontal markets have no echo chamber, no niches, no easy entry points. To make a system like this
work, everyone has to agree on the technology, and then there has to be a huge push to get millions of people to make the same decision at about the same time. It might work, but it’s awfully expensive.

Small markets aren’t as sexy, but they’re actually a better place to start.

I now firmly believe that there are two polar opposites at work:

Thrill seekers and

Fear avoiders

Notice that I don’t use the word “risk” to describe either category.

How do we explain the fact that
Forbes
finds more than 700 billionaires, and virtually none are both young and retired? Why keep working?

How do we explain why so many organizations get big and then just stop? Stop innovating, stop pushing, stop inventing …

Why are seminars sometimes exciting, bubbling pots of innovation and energy, while others are drone fests?

I think people come to work with one of two attitudes (though there are plenty of people with a blend that’s somewhere in between):

Thrill seekers love growth. They most enjoy a day where they try something that was difficult or—even better—said to be impossible, and then pull it off. Thrill seekers are great salespeople because they view every encounter as a chance to break some sort of record or have an interaction that is memorable.

Fear avoiders hate change. They want the world to stay just the way it is. They’re happy being mediocre, because being mediocre means less threat/fear/change. They resent being pushed into the unknown, because the unknown is a scary place.

An interesting side discussion: one of the biggest factors in the success of the U.S. isn’t our natural resources or location. It’s that so many people in this country came here seeking a thrill.

So why not call them risk seekers and risk avoiders? Well, it used to be true. Seeking thrills was risky. But no longer. Now, of course, safe is
risky. The horrible irony is that the fear avoiders are setting themselves up for big changes because they’re confused. The safest thing they can do now, it turns out, is to become thrill seekers.

Whom do you work with?

Optimism is a key to success, but it doesn’t necessarily work so well when it comes to VC. Because this is a cottage industry with thousands of players, all with different objectives, it’s very easy to keep knocking on doors, just waiting to find the right match. It’s also easy to spend a year or more adjusting your business to what each VC asks for (“bring me the broomstick of the Wicked Witch!”) while you could have been out there building a real organization.

Here are a bunch of conditions that you ought to take seriously before you invest the time and the energy to track down outside money for your great idea:

1. Investors like to invest in categories they’ve already invested in. If your business is so new that it’s never been tested before, or is in a category VCs hate, think twice.
   
2. Investors want you to sell out. As soon as possible. For as much as possible. They have no desire to own part of your company forever.
   
3. Investors want to invest in a project that’s tested. If you can’t make it work in the “small,” why do you think it’ll work when it’s big?
   
4. Being a little better than the market leader is worthless.
   
5. Investors don’t want you to use their money to cover your losses. They want you to build an asset (a patent, an audience, channel relationships) that’s actually worth something.
   
6. Investors want someone to run your company who has successfully run a company before.
   
7. Investors want to be able to come to one of your board meetings and still make it home in time for dinner.
   
8. VCs like curves more than they like cliffs.
   
9. There are actually very, very few business problems that can be solved with money.
   
10. You will probably have to replace many of your employees if you raise money from someone.
    
11. VCs understand that being the best in the world (#1) is the place with the biggest rewards, so it’s unlikely they will settle for any performance (even a profitable one) that puts you in second or third place.
    
12. VCs are very smart and very connected, but they’re smart enough to know that their connections and their insights can’t fix a broken business.
    
13. Investors are very focused on the company, not on you. They’re not interested in having you take out your original investment or paying you a large salary as profits go up.
    
14. Business plans are bogus. The act of writing one is critical, but no one is going to read more than three pages of what you write before they make a decision.
    
15. The companies that VCs most want to invest in are the companies that don’t need their investment to survive.
    

Most people in the U.S. can’t cook. So you would think that reaching out to the masses with entry-level cooking instruction would be a smart business move.

In fact, as the Food Network and cookbook publishers have demonstrated over and over again, you’re way better off helping the near-perfect improve. You’ll also sell a lot more management consulting to well-run companies, more high-end stereos to people with good stereos, and yes, more church services to the already well behaved.

Here’s why:

Because we measure the wrong things.

Talk show bookers, business plan competitions, acquiring book
editors, movie critics, tech entrepreneurs who run trade shows that try to predict the future, tech bloggers, marketing bloggers … when we’re trying to predict whether a new technology or website or book or song is going to hit, we’re almost always wrong.

Take a look at some of the picks for past Web 2.0 shows, or see who got hyped on various morning TV programs or see which authors were turned down by five or ten or fifteen publishing houses—“surprise hits,” they call them.

The astonishing thing isn’t that we’re wrong so often, but that given the amplifying power of our platforms, we’re unable to yell loud enough to make our predictions self-fulfilling prophecies. In English: You’d think that being featured by a big publisher or at a big conference would be enough in and of itself to make something undeserving a hit. Alas, only Oprah can do that.

So, why are we wrong? Why does your boss/in-law/friend/VC/editor/pundit always get it wrong?

Because they measure “presentation.” Not just the PowerPoint presentation, but the way an idea feels. How does it present? Is it catchy? Clever? Familiar? We measure whether or not it agrees with our worldview and our sense of the way the world is.

The problem is that hits change worldviews. Hits change our senses. Hits appeal to people other than the gatekeepers, and then the word spreads.

How? Through persistence and hard work and constant revision. By getting through the Dip.

If I have a skill in developing stuff, it’s in ignoring these people.
Purple Cow
was turned down by my old publisher and a few others. Squidoo was dissed by some of the best in the business (the site is about to hit 8 million monthly page views—update, now it’s closer to 40 million!).
The Dip
was a hard sell to my agent and my publisher.

No one “pre-predicted” the astonishing success of Flickr or Google or Twitter or Bill Clinton’s first run for president. Sure, it was easy to connect the dots after the fact, but that doesn’t count.

Of course, there are plenty of failures to go around (I know that I’ve got more than plenty). Just because everyone hates it doesn’t mean it’s good. Execution is everything. Execution and persistence and the ability
to respond to the market far outweigh a pundit’s gut instinct. But the thing to remember is this: if everyone loves it, it is almost certain to have troubles.

In fact, my rule of thumb is this: if the right people like it, I’m not trying hard enough.

One popular method is to make a dollar in profit from each of a million people. Or a penny from a hundred million. This is the China strategy. It almost never works.

It almost never works because the challenge of reaching that many people is just too great. It’s too risky and too expensive. Doesn’t matter that you’re hoping for only a dollar or a penny. The price isn’t the challenge; it’s the difficulty of spreading your idea.

Far easier to make a thousand dollars from each of a thousand people, or even $10,000 from a hundred organizations. You can focus on a small hive of people, a group that talks to itself. You can push through a smaller dip and reach a level of recommendation and dominance that makes incremental sales far easier.

And you can learn much earlier in the process if you’ve gotten it right or not. Because you’re making more per sale, you can spend the time necessary to figure out what really sells and modify your offering sooner in the process.

The irony is that many products and services that have reached huge masses of people actually have significant margins (Windows, for example, or a cup of Starbucks coffee). They got the best of both worlds because first they focused on winning over small communities and that led to the larger market.

The Wall Street Journal
reports that there are a slew of
Freakonomics
-like books on the market. Some of them are actually pretty good; few are selling at all. My guess is that the original has outsold its competitors by about 80 to 1.